Corporate Innovation Along the Supply Chain

In this paper, we document a positive effect of supplier–customer geographic proximity on supplier innovation. To establish causality, we explore plausibly exogenous variation in proximity caused by customer relocations. The positive effect of supplier–customer proximity on supplier innovation is st...

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Bibliographic Details
Published in:Management science 2019-06, Vol.65 (6), p.2445-2466
Main Authors: Chu, Yongqiang, Tian, Xuan, Wang, Wenyu
Format: Article
Language:English
Subjects:
Causality
Customer feedback
Customers
Demand
geographic proximity
innovation
Innovations
Logistics
Proximity
Relocation
Sales
Suppliers
Supply
supply chain
Supply chains
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Summary:In this paper, we document a positive effect of supplier–customer geographic proximity on supplier innovation. To establish causality, we explore plausibly exogenous variation in proximity caused by customer relocations. The positive effect of supplier–customer proximity on supplier innovation is stronger when customers are more innovative themselves, when suppliers and customers are closer in technological space, and when customers’ demand accounts for a larger fraction of suppliers’ total sales. These findings suggest that the feedback channel and the demand channel are likely underlying mechanisms through which supplier–customer proximity affects supplier innovation. Overall, our paper sheds new light on the real effect of supplier–customer relationship on corporate innovation. This paper was accepted by Gustavo Manso, finance.
ISSN:0025-1909
1526-5501
DOI:10.1287/mnsc.2017.2924